The ATO has warned taxpayers of arrangements that promote tax deductions for gifts of pharmaceuticals to charities for overseas use, similar to that outlined in TA 2010/8 – Gift deductions for donation of pharmaceuticals to charities operating overseas. The ATO says taxpayers should be aware that any arrangements they enter into with similar features may result in penalties as well as their deductions being denied.
In the arrangement that the ATO investigated:
- participants entered into contracts in 2009-10 to purchase and transfer pharmaceuticals for use in treatment programs to charities that are registered deductible gift recipients.
- participants made an initial payment of about 7.5% of the purchase price of the pharmaceuticals. The balance of the purchase price is due and payable up to fifty years after the contract was entered into. The participants also made a prepayment of interest, reflecting an interest rate of approximately 0.1% per annum, on the balance of the purchase price.
- the promoter claims:
- the pharmaceuticals were delivered by the vendor to a bonded warehouse in a country outside Australia.
- ownership of the pharmaceuticals was transferred to the participant, who then immediately transferred ownership to the nominated charities.
- entities associated with the promoter of the arrangement arranged and paid for the pharmaceuticals to be shipped to places nominated by the charities.
- participants were told that they could claim a deduction for the full contracted purchase price of the pharmaceuticals in 2009-10, the year that they entered the arrangement.
The Tax Laws Amendment (Stronger, Fairer, Simpler and Other Measures) Bill 2011 has been introduced in the House of Representatives. It includes the following amendments:
- increase the small business instant asset write-off threshold from $1000 to $6500, and consolidate the long-life small business pool and the general small business pool into a single pool to be written off at one rate of 30 per cent
- allow small business entities (annual turnover less than $2 million) to claim an accelerated initial deduction for motor vehicles acquired in the 2012–13 and subsequent income years. Purchase of a motor vehicle costing $6500 or more from the 2012–13 year will be able to be immediately written off up to $5000
- amend the Superannuation (Government Co-Contribution for Low Income Earners) Act 2003 to provide for a maximum $500 low-income superannuation contribution
- repeal the 25 per cent entrepreneurs’ tax offset